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10 February 2022

UK makes things more complicated than just offshore wind

Debt to GDP: 86.1% (-1% vs 2020)

GDP Per Capita (PPP): $46,344 (+3.1% vs 2020)

Population: 67.6 million (+0.6% vs 2020)

Electricity Consumption Per Capita: 4496 kWh


British coal’s century of decline reaches its conclusion

Famously Margaret Thatcher waged a political war in the 1980s to de-emphasize coal mining and switch to cheaper imported coal alongside gas and nuclear power. But the decline in the UK’s coal industry has been consistent all the way back to 1914, as the first ever industrialized nation gradually lost its role as the world’s factory.

By the turn of the millennium the UK imported more coal than it produced, at which point it stabilized for a decade. The collapse of coal demand in 2013-2016 coincided with 10 GW of solar and 5 GW of wind being deployed in four years – the solar industry died down afterward, but for the wind industry that was and is par for the course.

In 2012 coal was still 40% of British electricity generation, now it is negligible. The last coal plants will be closed in 2024, and have only been revived briefly at present because of the current high gas price.

Gas adoption slowing since 2016

The other main replacement for coal was of course gas, with the UK having adopted the fuel more intensively than almost any other country – at 35% of electricity and 85% of home heating. The UK’s currently operational gas plants were almost all built between 1995 and 2016.

Initially most gas came from the UK’s own North Sea holdings but at this point half is imported, largely from other North Sea states. In October, with gas prices beginning their rise, Oil and Gas UK (OGUK) took the opportunity to lament that the UK’s output would fall to 25% of current levels by 2030 without new investments. The UK has among the largest North Sea reserves, but those investments are not going to pan out – the country takes its energy transition commitments as seriously as the rest of Western Europe.

The UK’s gas industry is also declining on the storage side; in 2017 the government decided not to subsidise maintenance and upgrades at the Rough facility, leaving Britain with a mere fraction of the storage which several continental nations such as Germany boast.

There has not been an official decision to end further gas power development, and there is an 800 MW plant – Keadby 2 – under construction. The biggest news in the sector lately was a 3.6 GW behemoth which developer Drax cancelled a year ago after failing in a capacity market auction. Combined with today’s high gas prices, the question becomes not such much how many new plants there will be, but how long existing capacity will survive. Official plans have that process spread through to 2050.

Offshore wind giant, onshore not so much

If not for China’s astonishingly sudden offshore wind surge in 2021, the UK would still be the world leader in the sector with over 10 GW operational by the end of 2022, most of it in the North Sea.

With long lead times and high investment costs we had questioned whether the 2030 target of 40 GW, enough to supply a third of electricity generation, would be met. Rapid progress in the UK’s Contracts for Difference (CfD) auction system indicates that it will if anything be exceeded, with the latest leasing round, Scotwind, awarding 25 GW, from a target for the round of 10 GW and expectations of 12 GW.

The UK’s 2050 target for offshore wind is 100 GW, but given the as yet not fully appreciated potential of green hydrogen electrolysis demand, that will probably be exceeded. As remarked on the occasion of the Scotwind results, the Scottish local government wants to have 5 GW of “renewable and low-carbon” hydrogen production capacity by 2030.

Floating wind should become cheaper than fixed-base in time, but for now its central appeal to the UK – especially Scotland – is expanding wind development beyond the relatively shallow waters of the Irish Sea and the English coast. Of the 25 GW awarded in the Scotwind leasing round, 14.5 GW was floating.

As for onshore wind, by the end of 2021 its share of total British wind capacity had already fallen to 57% – 14 GW out of a total of 24.4 GW. The UK’s offshore wind speeds are good, with the North Sea getting 9 meters per second commonly, while the average onshore wind speed is a decidedly mediocre 4 meters per second. Moreover, new planning permission restrictions brought in in 2015 which have strangled new projects, and the subsidy was cancelled. In 2021, as expected, the subsidy was restored – but at a very low level, part of a spending initiative which gave most attention again to offshore wind and other offshore technologies like wave and tidal.

Batteries and EVs have surged

In the latest T-4 capacity market auction 8.3 GW has been pre-registered, up four times compared to the auction of a year before that. The entire pipeline of planned projects is ill-defined but may be as high as 40 GW – not all of which will be built. The most notable energy storage initiative so far has to be Canadian Solar’s agreement with Windel to build 1.5 GW of 2-hour storage alongside 1.4 GW of solar.

As of the end of 2021 Britain’s EV sales have reached over a quarter of the total, and there are 400,000 pure EVs plus 800,000 plug-in hybrids on the road. YoY sales grew 76%, a typical figure Western Europe.

One of the North Sea hydrogen powers

Everyone knows at this point that the North Sea is one of the biggest centers of future green hydrogen production, and the UK’s commitments are respectable enough in scale compared to its North Sea peers. The government published a hydrogen strategy in August featuring 5 GW of “clean hydrogen” production capacity by 2030 – rather upstaged by the Scottish local government, which administrates a small fraction of the country, also adopting a 5 GW target.

The UK’s definition of clean hydrogen includes CCUS-enabled blue hydrogen, and the government has not decided whether hydrogen will be adopted as the primary replacement for natural gas in home heating – so there is plenty to be done here still. They do say that hydrogen will be between of 20% and 35% of total energy consumption in 2035.

One vote of confidence in the UK’s nascent hydrogen industry is a $2.2 billion proposal to resurrect the aforementioned Rough natural gas facility as hydrogen storage. Situated on the eastern coast, the facility would be close by future sites of hydrogen production built near the North Sea wind farms – including the Gigastack and H2H projects.

In future North Sea offshore wind and hydrogen will be joined by expanded transnational links to all the other northwest European states, especially to Norway’s dispatchable clean hydropower. The network will have important nodes in the form of “artificial islands”, of the type proposed by Denmark holding substations and other equipment, and it may be filled out by floating solar and maybe in-situ hydrogen production.

Looking to France and China for nuclear power

One way in which the British government complicates things is support for nuclear power. With an aging fleet outages and retirements become more frequent and in 2021 nuclear’s share of the energy mix fell again to 15% of the total. Half of that capacity is due to retire by 2025.

As with France, the decline is not motivated by the Fukushima disaster but simply by the passage of time and more attention being given to renewables for a time. Also like France, the government has decided to revive the industry at least to a degree with new power plants. The comparison breaks down on one aspect however – the UK has lost its expertise and must look to China and France to build its new nuclear plants, whereas the French still have most of the requisite skills. President Macron has recently asked for co-operation with the Russians, but it is to help train his own people not to contract a foreign country.

The Rolls-Royce Small Modular Reactor (SMR) technology has received a £210 million research grant in 2021, supported by £250 million equity funding, so perhaps the UK will be able to do its own thing again in the fullness of time. Until then it is left bargaining with EDF and China General Nuclear Power over the price tag for the upcoming 3.2 GW Sizewell C nuclear plant, which has risen to $27 billion.

Biomass red herring

An even more quixotic element of government strategy is supporting biomass, in particular the Drax biomass plant, which has a capacity of 2.6 GW, burning woodchip pellets generally imported from the US, as well as a little-used 1.3 GW coal remnant from the 70s. It is only a matter of time until this power plant gets recategorized as dirty, but until then this is 6% of the UK’s power supply masquerading as clean.

Another European solar market that is yet to wake back up

In the other top five European solar markets, namely France, Germany, Spain and Italy, installations slowed or stalled entirely from 2011 or so after subsidies were reduced in the wake of the Great Recession. The UK was slow to the Feed-in Tariff club, with its law only taking effect from 2010, and it was likewise late to cut the subsidy, finally ending it in 2019. Today installations are only a few hundred MW a year, with Spain, France and Poland all bound to overtake the UK soon.

So far almost all UK solar developments have been distributed, but as the market wakes back up, several full-size utility-scale projects are being planned. Solar could be awarded tenders just like wind in the UK’s CfD system, but for the obvious reasons wind hogs all the capacity awarded from the CfD’s conventional renewables “Pot” in this rainy and windy country.

A major green research presence, but little manufacturing

An oddity of the UK’s green ambitions is that it has no national champion of manufacturing or project development. There are wind turbine factories in the country but they belong to Siemens, Orsted and the like. Even more so than the rest of Europe, the UK is a place of R&D, finance, and end-use, but not making or installing things on the global stage. It does have Oxford PV, the perovskite tandem solar company, but that company is still working through the technology of its first production line.

The UK is overrepresented among tidal energy and wave energy thanks to a combination of natural conditions and early government support for R&D – which is still being extended, with an update to its auction system, assigning another £7.5 million for wave energy and £20 million for tidal last year.

In the past year the country also commissioned its first geothermal capacity, so it now numbers among the states which have drilled below four kilometers, something of a novelty in that sector. Because of Cornwall’s unique geology that geothermal may become a trailblazer for cheap lithium brine extraction though the broader relevance of such an approach remains to be seen.